What are the Implications If the Authorities Tolerate Tax Offences? Does the State Have a Joint Responsibility Pertinent to Penal Law?

German Federal Supreme Court (BGH) Ruling on Tax Evasion in Company Dated 15 May 2018

Published On 15 May 2018, the BGH inter alia concerned itself with the question what implications it has if the authorities do not prevent tax offences. Does the state have a joint responsibility pertinent to penal law?

The assumption that a joint responsibility of the state for fiscal damages incurred was established if the authorities tolerate further tax offences by not immediately pointing out existing initial suspicions to the taxpayer is mistaken.

There exists no claim of an offender that the investigative authorities intervene in time in order to prevent his offences.

Such a claim does in particular not follow from the right to a fair trial according to Art. 6 para. 1 ECHR.

An offender also does not have any claim for an early intervention of the prosecution authorities if his activities continuously cause further high fiscal damages.

It is applicable that the conduct of the tax authorities as the infringed party – the same as with another infringed party of an offence – can be considered in mitigation if it was jointly responsible for the success of the offence.

However, it has to be observed that the taxation system depends on true information given by the taxpayer; an examination of all facts relevant under tax law by the tax authorities is not possible.

If an offender abuses the control mechanisms, which due to the system are not very intense, this cannot be to his benefit.

Therefore, a joint responsibility of the state for tax evasion is regularly only given if the conduct to be blamed on the state authorities had a direct influence on the activity of the offender, for instance because the offender previously had not been inclined to offend or because the offence at least was facilitated by the conduct of the tax authorities and the state authorities can be blamed for the genesis of the offence.

By way of judgment dated 15 May 2018 – 1 StR 159/17 (recently published at www.bundesgerichtshof.de), the German Federal Supreme Court had to concern itself i.a. with the question whether there is a joint responsibility of the state pertinent to penal law if the authorities do not prevent tax offences.

The defendants themselves were employees of a German major bank who cooperated in the bank’s greenhouse gas emission allowance trading and in this connection supposedly accepted that due to a possible involvement of the bank in MTICs turnover tax was evaded (BGH, judgment dated 15 May 2018 – 1 StR 159/17).